Peninsula Energy Limited

PEN Details

Peninsula Energy Limited (ASX: PEN) wholly owns the Lance Uranium Projects in Wyoming, USA, transitioning from an alkaline in-situ recovery to a low pH in-situ recovery operation. This transition aims to achieve the operating performance and cost profile of global uranium production projects.

Results Performance for the Year Ended 30 June 2021 (FY21)

• Of the US$13.3 million cash proceeds from the sale of 275,000 pounds of uranium, only US$9.8 million was generated as revenue for FY21. A balance of US$3.5 million was allocated to derivative fair value.
• It reported a consolidated group loss of US$1.4 million in FY21 after taking into consideration an income tax expense of US$0.5 million compared to a loss of US$7.6 million in FY20.
• The consolidated cash position, excluding security deposits and performance bonds, as of 30 June 2021 stood at US$6.7 million.

Source: Company Reports, Analysis by Kalkine Group

Quarterly activities report for the period ended 31 December 2021

• The company had cash of US$9.3 million as of 31 December 2021. Further, it has 310,000 pounds of uranium, with a market value of US$13 million.
• It sold 50,000 pounds of U₃O₈ at US$45.06 per pound in the quarter. Sale receipts of 250,000 pounds of U₃O₈ generated a net cash margin of US$4.3 million generated in the quarter.

Outlook

The company has started the evaluation of field demonstration data at the Lance project with an expected two-month period of data analysis and process design evaluation before commencing an update of capital and operating costs. Meanwhile, the permitting of the identified process enhancements is in progress.

Further, the company holds uranium concrete sale agreements with major utilities for around 5 million pounds U308 at an average pricing of US$53 to US$55 per pound. Additionally, PEN holds an overall U3O8 uranium concentrate purchase commitment amounting 0.45 million-pounds as of 31 December 2021. The portfolio of uranium concentrate sale and purchase agreements have secured a forecast net cash margin of US$8 million to US$9 million on uranium sales in CY2022.

Key Risks

The company is exposed to risks associated with the existing mineral resource estimates, which could slightly deviate from actual findings. Further, the company must follow the conditions included within the prescribed low pH permit and use the common pH mining method across the entire Ross Permit Area.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Stock Recommendation

The company has delivered a 6-month and one-year return of ~+31.25% and ~+100.00%, respectively.

The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a fall of low double-digit (in % terms). In addition, a slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering the negative ROE in FY21 and decreased liquidity position in FY21 over FY20.

Considering the aforementioned factors, the current trading levels, and the associated business risks, we advise the investors to book profits. We give a “Sell” rating on the stock at the current market price of $0.225 per share as of 2^nd March 2022 (Time: 11:25 AM (GMT+10), Sydney, Australia).

Technical Overview:

Daily price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period) 

PEN is a part of the Global Green Energy Portfolio

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.